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Winnebago’s quarterly profit skids

Winnebago Industries Inc. said Friday its third quarter profit skidded 73 percent as high gas prices, tighter credit and a soft economy drive motor homes sales lower industrywide.
/ Source: The Associated Press

Winnebago Industries Inc. said Friday its third quarter profit skidded 73 percent as high gas prices, tighter credit and a soft economy drive motor homes sales lower industrywide.

“The motor home market has changed significantly in the past year, with dramatic declines in the past few months,” CEO Bob Olson said in a statement. “Discretionary purchases have declined in the United States as the country is faced with unstable fuel prices, consumer confidence at 16-year lows and a tighter credit environment.”

He said he expects no improvement in the industry for the rest of 2008.

Winnebago shares tumbled almost 10 percent.

The Forest City-based motor home manufacturer earned $3 million, or 10 cents a share, in the three months ended May 31 compared with a profit of $11.3 million, or 35 cents a share, a year ago.

Sales fell almost 40 percent to $139.7 million from $231.7 million a year ago.

The latest net income figure included a tax benefit of $8.9 million.

The company reported an operating loss of $6.9 million compared with an operating income of $14.7 million a year ago.

Analysts surveyed by Thomson Financial expected earnings of 3 cents a share on higher sales of $157.6 million. The estimates typically exclude one-time items.

Analyst Craig Kennison with Robert W. Baird & Co. said in a report issued Friday the company’s pretax loss was below expectations. He said the tax benefit amounted to 24 cents a share, leaving the company with a pretax loss of 14 cents a share, significantly worse than his estimated loss of 7 cents.

The company sells motor homes under the Winnebago, Itasca and ERA brand names.

Olson told analysts in a conference call that dealers are cutting their inventories, a trend he expects to continue, which further reduces sales.

In addition, competitors are discounting motor homes forcing Winnebago to offer discounts.

“If we don’t do something to try and stimulate the market we could get left in the dust,” he said. “This could end up being a discounting war, a war I don’t want to fight but it may come to that.”

Profit for the first nine months of the year fell 42 percent to $15.5 million, or 53 cents a share, compared with $26.7 million, or 84 cents a share, for the comparable period a year ago which was one week shorter.

Nine-month sales fell 18 percent to $519.1 million from $632.5 million.

Olson said the industry has seen a decrease in motor home sales of more than 26 percent for the first four months of this year and a decline of more than 30 percent in both March and April, typically strong sales months.

He said additional consolidation is under way to reduce overhead costs and industry conditions are monitored on a daily basis to asses whether further cuts are needed. The restructuring will cost the company $2.5 million to $5.5 million in charges in the fourth quarter.

Olson said the company has cut employment by 830 workers, or 26 percent, through layoffs and attrition since the beginning of its fiscal year.